Suppose an Apartment Complex Converts to a Condominium (I

question 164

Multiple Choice

Suppose an apartment complex converts to a condominium (i.e., the renters become owners of their apartments) . Suppose the value of the condominium owners' housing services is now the same as their former rent. What happens to GDP?

• A) GDP necessarily increases.
• B) GDP necessarily decreases.
• C) GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP.
• D) GDP is unaffected because previously rent was included in GDP, and now it is replaced by the estimate of the value of housing services.

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Definitions:

Average Rate

A mean value calculated to represent the typical rate of something, such as interest, return, or speed, over a given period.

Fixed Asset

Long-term tangible property that a firm owns and uses in its operations to generate income, such as buildings and machinery.

Useful Life

The estimated period over which an asset is expected to be usable by an organization, after which it is considered to be no longer useful for business operations.

Residual Value

The estimated worth or salvage value of an asset at the end of its useful life.